An Empirical Study on the Relationship between Sophisticated Capital Budgeting Practices and the Performance of Japanese Firms

Abstract

This paper investigates the relationship between sophisticated capital budgeting techniques and the performance of Japanese firms. This is the first study in a Japanese context and the result shows a weak correlation between sophisticated techniques and the performance of Japanese firms. In addition, this paper focuses on capital budgeting processes, especially the combined use of sophisticated methods and ex-post follow-up. This original view has not been considered in previous studies. As a result, this paper provides evidence for positive correlation between firms' performance and sophisticated capital budgeting processes.